India cancels high-value denominations
India’s 500- and 1,000-rupee bills have benefited money launderers and tax evaders, according to Indian Prime Minister Narendra Modi, and he has moved decisively to cancel those bills and expose cash hoarders.
Extensive Wall Street Journal reporting details Modi’s efforts to cut the legs out from under individuals with large stashes of cash held in high-value denominations. The consequence, according to the Journal, is that business owners are “paying months of salary in advance, ringing up bogus sales, and even buying gold they can smuggle overseas to get rid of stashed money or conceal its source.”
According to the report, only 1.6 percent of the population in India paid income tax in 2013, and the overall average tax revenues are less than half of the average collection in other major nations around the world.
Modi’s unprecedented move to cancel high-value currency is intended to force Indians to swap out their cash hoards for bills in lower denominations—under the close attention of Indian authorities tasked with identifying cash exchanges that appear suspicious due to the amount or questionable source.
Modi’s attempt at exposing the nation’s tax evaders and money launderers has spurred various strategies to protect illicit wealth, including black-market exchanges, backdating transactions, creating false invoices and enlisting the poor as cash exchangers.
More than $80 billion—about 40 percent of the canceled bills—has been exchanged. The deadline for the last exchange of canceled denominations is Dec. 30, according to the Journal.
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